I would guess that most people here that own their own business set them up as LLC's. Anyone do an S Corp instead? If so what was the biggest reason you became an S Corp?

s corp. California does not allow any entity with a contractors' license to be an LLC

Were an S corp.

Even though an LLC is limited liability if you make a mistake and someone ends up getting hurt then they can still come after your home, cars etc. And god forbid you had yo declare bankruptcy then it goes on your life/credit

S corp allows all losses and gains to flow to the shareholders while being a complete entity of its self, So if you hurt someone or burn down there house then all they can do is take your business but your personal life is unaffected, the same goes for if you need to declare bankruptcy. Also, business vehicles you can 3rd party guarantor them and they wont show up in your personal credit history and if your in business for 5 years they no longer require personal credit checks to purchase equipment or vehicles.

Really the only drawback with an S corp is taxes, you will end up paying a bit more for an accountant to do your taxes if your a corporation but the advantages out way the cost by far. If you choose to go with an S corp have a lawyer/accountant set you up or use someone like www.legalzoom.com. will make your life ALOT easier

Yup. We actually have both. The LLC was our first and handles the retail the s-corp is for installation, however soon it will all be under the s-corp.

Not true. I am an LLC as a business entity and file as an S-Corp with the IRS. This is how it works in Colorado.

S-Corp vs. LLC:
[Link: residual-rewards.com]



"Advantages of LLC

Limited Liability: Owners of a LLC have the limited liability protection of a corporation.


Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.


No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.


Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.

Disadvantages of LLC

Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.


Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.


Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply."

Wellll, Not exactly. There are issues with LLCs and a quick search yields forums where builders went bankrupt/royally screwed up a home and when sued the lawyers were able to gain access to homes, vehicles personal assets and savings accounts.

When i started our business i was made well aware by my lawyer that creating an LLC meant if a disaster were to occure and a customer got hurt it is a strong possibility with an LLC they could come after everything I had. He didnt charge me more for starting an llc or corp but i was well warned.

Each state has different laws, and NJ is one that if the work was being done and an LLC you can be held personally liable.

Also something to keep in mind, an INC. is much more professional and comforting to customers then an LLC. Especially ones that know the different structures, at least my customers seem to know :)

S corp because my accountant said so!

+1

Were these builder LLLPs or LTDs?

In Colorado:
"LIMITED LIABILITY COMPANIES (LLC's)

Limited Liability Companies were created by statute in 1990. The LLC has some of the attributes of a sole proprietorship, a general partnership and a corporation. For tax purposes, it is treated as a partnership. The LLC has members rather than shareholders. It has a manager or managers instead of a board of directors. Management may be vested in the members or it may be vested in the manager(s). It is essentially a business entity created by contract between the members, much as a general partnership. However, in order to be legally recognized, it must file Articles of Organization with the Department of State. The members are protected from personal liability for the acts of the LLC, much like shareholders of a corporation. The LLC differs from an "S" corporation in that it is not restricted in the number or types of individuals or other entities that may be members. It also differs from a limited partnership by not imposing personal liability on members for participating in the management of the LLC."

You are wrong on your idea of S Corp protecting you. If it can be proved you had intimate knowledge or personally caused the calamity , you are on the hook. If it was a dope employee that screwed up without you telling him to screw up, then you are protected.

And shouldn't it be that way anyway?

Sig has it right, every state is different. Check with an accountant in your state to find out what is best for you and your business model.

I've read a bunch of different websites that give different advantages for going with both. Because of our somewhat unique business model I wanted to see what route others had gone. How many people with S Corps are sole owners? I REALLY like the look of having INC at the end of my business name!! I do need to "Hire a pro" and figure out which way I should go. Being a sole owner and wanting to be able to move money from the business to myself easily is great with an LLC. I do commercial work and would hate to be on the hook for anything that could go wrong so an S corp seems like the best option. I don't do shoddy work but a power supply overheating and causing a fire could happen and the manufactures lawyers are better then mine so they could pass the buck and blame on to me.

Luckily it seems Delaware is where all the big companies are incorporated so I'm in a business friendly state. Thanks for all the input.

True, Very True. But i think we all know that. Its more of a danger when your a one man shop but if you have employees and cant babysit them 24/7 then its almost a must have.

Just check with your state, I see you mentioned Delaware they are a INC. friendly state, So is Pennsylvania (which we are currently moving over to) Just make sure you hire a pro, they know a hell of a lot more.

Good Luck! what part of Delaware? if you dont mind me asking

The tax liability for and s-corp is smaller if you don't make a ton of money. If you make a ton of money, then it is actually better to be taxed as a separte business entity. For example if you make less than $244k with you salary and business profit, then it's better to an s-corp (less taxes). If you make more than $244k then it's more beneficial to be an LLC (Less taxes). At least this is what our accountant tells the owner.